Steward hospital finances prompt protest

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You don’t often see a labor union picketing medical offices, but that’s what happened last week in Quincy.

Members of SEIU United Healthcare Workers East demonstrated outside Granite Medical Group, part of the big Atrius Health physician organization. Their beef: Granite doctors were sending too many patients to Beth Israel Deaconess Hospital-Milton instead of to Quincy Medical Center, where they work.

There is an interesting story behind their complaints, but more on that later. For now, focus on the fact that Quincy is controlled by Steward Health Care System, a for-profit medical group that owns 10 Massachusetts hospitals. Some of them appear to be under increasing financial stress.

While union organizers protested in Quincy last week, Steward executives rolled out plans to bring two other hospitals it owns “closer together.” Steward intends to merge Merrimack Valley Hospital in Haverhill and Holy Family Hospital in Methuen onto a single hospital license.

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Steward says this will put both hospitals on a “stronger financial footing,” but no one, neither patients nor employees, should notice any difference. Good luck with that.

You won’t be surprised to learn the company disagrees with me about the financial situation at some of its hospitals.

“Over the last three years, Steward has taken a group of chronically distressed hospitals and put them on a path to financial stability,” says spokeswoman Brooke Thurston. “We’re making progress and are headed in the right direction.”

That’s true at some Steward hospitals, but the limited financial figures made public show facilities headed in several directions.

Among Steward’s 10 hospitals, five reported operating losses through the first nine months of 2013, the most recent data available. The 10 posted an aggregate operating gain of about $2.9 million.

Quincy Medical Center, by far the worst performer, recorded an operating loss of $14.6 million. Holy Family made $7.5 million but its much smaller merger partner, Merrimack Valley, lost just as much.

Steward likes to point out that the financial performance of its hospitals is skewed by the many millions it spent to upgrade facilities in desperate need of attention.

But investments don’t distort something called net patient service revenue. That’s a way of counting how much hospitals collect for taking care of patients, and those revenues were down at seven of Steward’s 10 hospitals through Sept. 30.

Overall at Steward, those revenues were off about 3 percent. But at Quincy, they were down nearly 18 percent. Patient revenues fell 14 percent at Merrimack Valley.

Declining patient revenues are not unique to Steward. Recently, I talked to several hospital executives who call them an industry trend caused by tougher payment rules in the Affordable Care Act, among other things.

But Steward’s private equity owners spent big money on the idea that more patients would use improved facilities. Build it and they will come. It really doesn’t matter much why patient revenues are getting squeezed.

Hospitals make all kinds of deals to secure a steady flow of patients. In Quincy, the protesters complained about Granite Medical but really pointed to a deal struck at a higher level — between Atrius and Beth Israel Deaconess in Boston. Atrius doctors send patients to Beth Israel in large numbers every year.

It’s one thing for doctors to refer complex cases to big-city hospitals, but once Beth Israel acquired Milton Hospital, the protesters complain, the same arrangement simply directed care to a different local facility.

Every hospital needs patients. Some Steward hospitals need more of them.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

Correction: An earlier version of this story incorrectly reported the operating results of Steward hospitals. Five of the company’s 10 hospitals posted operating losses, and all the hospitals earned an aggregate $2.9 million. An earlier version also misspelled Steward spokeswoman Brooke Thurston’s first name.

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